Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net income for the quarter grew significantly, reaching a record high.
- Total net revenue increased by 12.5% year-over-year and 14% sequentially.
- The company initiated a 20 million share repurchase program, enhancing shareholder value.
- Delinquency rates for outstanding loans improved, indicating better asset quality.
- The company expects loan volumes to gradually recover in the second half of the year.
Negative Points
- Total loan amount facilitated and originated decreased by 2% year-over-year.
- Origination and service expenses increased by 19% year-over-year.
- Provision for loans receivable increased significantly, indicating higher risk.
- Borrower acquisition and marketing expenses decreased by 3%, potentially impacting future growth.
- The average loan size has decreased significantly, reflecting a cautious risk management approach.
Q & A Highlights
Q: You provided substantial guidance about an increase in loan volumes for Q3. What gives you confidence in that growth?
A: This confidence stems from the improved delinquency performance and optimized approval policies. Our restrictive risk management system kept approval rates low in the first two quarters. With better delinquency rates, we have adjusted our approval policies, leading to higher approval rates. Additionally, new customer channels will contribute to this growth. - Fuya Zheng, Chief Financial Officer
Q: Could you talk about customer acquisition costs and any changes there?
A: Our customer acquisition costs have remained fairly constant. With lower approval rates, our overall spending was kept low, translating into lower loan volumes. As approval rates increase, our spending will rise in Q3, leading to higher loan volumes. - Fuya Zheng, Chief Financial Officer
Q: Are you seeing improving consumer health or a turn in the overall economy?
A: While the overall economy hasn't significantly improved, our machine learning system has become more efficient in risk management. This allows us to separate better customers from marginal ones. Additionally, new channels have opened up, providing us with higher-quality customers. - Fuya Zheng, Chief Financial Officer
Q: The number of active borrowers is up substantially while loan volumes were down year-over-year. Does this mean the average loan size is smaller? What's driving this?
A: Yes, the average loan size has decreased significantly as part of our risk management strategy. In a challenging environment, we intentionally lower the average loan size. As conditions improve, the average loan size will grow, contributing to overall loan volume. - Fuya Zheng, Chief Financial Officer
Q: What are the key factors contributing to the improved asset quality?
A: The improvement in asset quality is due to our proactive management and refined risk management system. We have eased strict controls on loan volumes as asset quality has improved, expecting loan volumes to recover in the second half of the year. - Kan Li, President
Q: Can you provide more details on the share repurchase program and its impact?
A: In May 2024, we announced a new 20 million share repurchase program. We completed a tender offer to purchase 2 million ADS in June and July 2024. This buyback provides liquidity to shareholders and increases the remaining shareholders' stakes in the company. - Fuya Zheng, Chief Financial Officer
Q: What are your expectations for loan volumes in Q3?
A: For Q3, we expect the total loan amount facilitated and originated to be between RMB 26 billion and RMB 27.5 billion. - Fuya Zheng, Chief Financial Officer
Q: How has the dividend policy been implemented this year?
A: We have a semiannual dividend policy. For the first half of 2024, our board authorized a dividend of $0.17 per ADS. Specific payment dates and instructions are available in our earnings release. - Fuya Zheng, Chief Financial Officer
Q: What are the main drivers behind the increase in net income?
A: The increase in net income is driven by strong financial results, improved asset quality, and effective cost control. Net income grew 13% year-on-year and 14% sequentially to RMB 415 million, a record high. - Fuya Zheng, Chief Financial Officer
Q: How do you plan to maintain sustainable profitability?
A: Our focus remains on sustainable profitability by employing flexible tactics to adapt to evolving market conditions. We will continue to strengthen and refine our risk management system to improve asset quality and increase shareholder value. - Kan Li, President
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
